Nuclear gazumping in Mongolia

25 August 2009

A Canadian firm has apparently been pushed aside from a uranium deposit in Mongolia so that the country could set up a tax-break company with Russian interests instead.


Dornod (Khan)
Dornod (Image: Khan)
A deal struck today by Rosatom and The Office of Nuclear Energy of Mongolia during a state visit was said to lead to a 50-50 joint venture of AtomRedMetZoloto (ARMZ) and MonAtom to develop Dornod.


Martin Quick, head of Toronto-based Khan resources, which owns 58% of a mining lease and 100% of an exploration lease relating to Dornod, told WNN he was in Mongolia "trying to sort out fact from fiction."


In July, while other companies were having their mining and exploration licenses suspended for unknown reasons, Khan was complaining about a surprise new nuclear law that granted the state more control of uranium reserves. Now it would appear the about-face from Mongolia has been completed by a deal to work with ARMZ instead.


Dornod was chosen for the first joint venture between the state-owned companies because it has "in excess of 50,000 tons of uranium reserves" and is ready for the legal work ahead of "a short time to start mining," said ARMZ. The supposed joint venture will be tax-exempt for the Russian workers during its early phases.


Quick said: "Khan is the legitimate 100% holder of an exploration license at the Dornod uranium project as well as a 58% holder of a mining license held by Central Asia Uranium Company (CUAC). The other two partners in CUAC are Monatom and ARMZ." He said that this would still be the case "after the dust has settled," and added, "If the Mongolians do choose to hand over their uranium assets to the Russians, and thwart the democratic process which they have been following since independence, that of course is their right. But I really do not think for a moment that this will be the case."


Nevertheless, the upset will be chilling for other firms working to develop Mongolian uranium opportunities. Western Prospector has 11 contiguous licenses to explore for uranium in the Saddle Hills area, which covers seven known uranium deposits including Gurvanbulag, and which like Dornod was previously exploited by the Soviet Union.


Other companies with interests in Mongolia include Denison, Red Hill and Mega Uranium while Century City has an agreement with China Nuclear Energy Industry Corporation (CNEIC) to explore and develop uranium resources. CNEIC is a subsidiary of China National Nuclear Corporation, which made a $25 million takeover offer for Western Prospector this March.